London business confidence rising: Service sector growth accelerating

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FURTHER evidence that the economic recovery is turning out to be stronger than expected has been provided by the latest business trends survey from the London Chamber of Commerce and Industry.

The study, which covers 250 firms employing nearly 200,000 people, shows that business confidence strengthened and service sector growth accelerated in the second quarter of 1993.

It gives an indication of the likely national picture that will be painted by the British Chambers of Commerce when the full survey is published later this week.

About 44 per cent of London-area service firms recorded an improvement in domestic business, with only 15 per cent saying they had experienced lower business levels. The 29 per cent positive balance compares with 5 per cent in the first quarter and is the highest for three and a half years. About a third of firms on balance expect business to improve in the third quarter of the year.

But the outlook for jobs remains gloomy, with service sector employment particularly hit - 11 per cent of firms reported a fall in staff levels. Although the balance of manufacturing firms taking on staff, 13 per cent, remained positive, it was lower than in the chamber's previous survey. 'Business is generally more upbeat,' Simon Sperryn, chief executive of the chamber, said. 'But there are still some depressing indicators. The outlook for investment and jobs is still very cloudy.'

The survey follows a string of good economic news last week, including the fifth successive monthly fall in unemployment, a surge in manufacturing activity and a fall in unit labour costs.

It also comes on top of a report from the surveyors Richard Ellis showing demand for office property in central London is at its highest for three years. About 2.6 million square feet has been leased or sold during the second quarter of this year, an increase of 47 per cent on the first quarter.

Although the West End has shown most improvement, there has also been an upturn in the City. Much of the 1 million square feet of take-up in the City - compared with 450,000 square feet in the last quarter of 1992 - was due to the IRA bomb in Bishopsgate. Nevertheless, the surveyors say the trend is upward and the level of inquiries provides 'grounds for optimism'.